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2023 (7) TMI 208 - AT - Insolvency and BankruptcyInitiation of CIRP u/s 7 of IBC - NCLT admitted the application - basic requisites of Debt and Default, that are required to be examined and proven, prior to the admission of Petition, seeking to initiate Insolvency Process, was not established - Non-application of mind by Adjudicating Authority - HELD THAT - In the instant case, there is no dispute, in regard to the sanction of Loans, amounting to Rs.355.40 Crores, by the 1st Respondent / Bank, to and in favor of the Corporate Debtor, beginning from the Year 2010. Furthermore, more than Rs.3,000 Crores, were advanced by the 12 Financial Institutions, together with the 1st Respondent / Bank, amounting to over and above Rs.3,000 Crores, in part financing the costs for setting up of 540 MW Coal Fired Thermal Power Plant, in Taran Tarn, Punjab, and for ease of convenience, the Lenders, has referred to supra or termed as Senior Lenders. Admittedly, a Loan Recall Notice, dated 17.12.2019, was issued by the 1st Respondent / Bank / Petitioner / Financial Creditor, because of the Default, committed by the Corporate Debtor, in making payments, as per Master Amendment Agreement dated 21.07.2017. In reality, the Corporate Debtor / GVK Power (Goindwal Sahib) Ltd., had availed the Credit Facilities, but, failed and neglected to operate the same, in accordance with the agreed Terms and Conditions. The Account, was classified, as Non Performing Asset, from 29.11.2017. It is pointed out that from the Information Utility i.e., National E-governance Services Limited, a record of Default, was produced, before the Adjudicating Authority, on behalf of the 1st Respondent / Bank / Financial Creditor - Be it noted that, the Inter Creditor Agreement, was executed by some Consortium Lenders of the Corporate Debtor (including the 1st Respondent / Bank / Financial Creditor), pursuant to the Reserve Bank of India s Directions 2019. In reality, the Inter Creditor Agreement, dated 06.07.2019, was executed to afford a scaffold, for a possible Resolution. No wonder, there is no Fetter in Law, much less in the Reserve Bank of India s Directions 2019, for the Lenders, to resort to the Summary I B Code Proceedings. The Right of the 1st Respondent / Bank, especially, under the I B Code, 2016, cannot be taken away or overridden, by any Reserve Bank of India s Rule, etc. It is to be remembered that the Corporate Debtor, cannot seek an umbrage, under the Inter Creditor Agreement, with a view to avoid, evade, circumvent and supplant its obligation(s), in terms of the Loan Facility Agreement . Continuing further, the I B Code, 2016 (vide Section 238 of the I B Code, 2016), will have an overriding effect, in regard to anything inconsistent therewith contained in any other Law, for the time being in force. In the present case, the Corporate Debtor has not furnished any material evidence to suggest that, it will be in a position to repay the amounts, owed to the Lenders. It cannot be forgotten that no endeavour was made to accomplish a Resolution Plan, although many deliberations and meetings, had taken place. Besides these, the Corporate Debtor, inspite of request made by the Lenders, had not opted to Improve and Revise, the One Time Proposal, which is an unfavourable circumstance, as opined by this Tribunal. Keeping in mind of the fact that the Defaults, had taken place in the year 2017, the huge Public Monies, are entangled, and the main Company Petition, was preferred, before the Adjudicating Authority / Tribunal, on 20.12.2019, with a view to prevent, diminishing Value of the Assets of the Corporate Debtor, to protect the Creditors interests, and considering the totality of the integral facts and circumstances of the case on hand, in a conspectus manner, comes to a resultant conclusion that the view, arrived at by the Adjudicating Authority / Tribunal, by exercising its Judicial Discretion, ofcourse, in admitting the Section 7 Application, does not suffer from any Material Irregularity, or Patent Illegality, in the eye of Law. Accordingly, the Appeal fails - Appeal dismissed.
Issues Involved:
1. Whether the Section 7 Petition was admitted correctly by the Adjudicating Authority. 2. Whether the Priority Lenders' claims and RBI Directions impact the maintainability of the Section 7 Petition. 3. Whether the Corporate Debtor's obligations and financial conditions justify the initiation of Corporate Insolvency Resolution Process (CIRP). Summary: 1. Admission of Section 7 Petition: The Adjudicating Authority admitted the Section 7 Petition filed by the Financial Creditor under the Insolvency and Bankruptcy Code (IBC), 2016. The Tribunal found that the Financial Creditor had established the existence of a financial debt and default, which met the threshold limit for initiating CIRP. The Tribunal concluded that the application was fit for admission, placing the Corporate Debtor under CIRP and declaring a moratorium. 2. Impact of Priority Lenders and RBI Directions: The Tribunal examined the arguments regarding the Priority Lenders and RBI Directions. It was observed that the Inter Creditor Agreement (ICA) and RBI Directions did not preclude the Financial Creditor from initiating insolvency proceedings. The Tribunal noted that the standstill provision in the ICA only applied for an initial 30-day period unless a resolution plan was agreed upon, which did not happen in this case. The Tribunal held that the RBI Directions and ICA clauses could not override the statutory rights of the Financial Creditor under the IBC. 3. Corporate Debtor's Obligations and Financial Condition: The Tribunal evaluated the Corporate Debtor's financial condition and obligations. It was noted that the Corporate Debtor had defaulted on significant loan amounts and had not provided any resolution plan despite multiple opportunities. The Tribunal found that the Corporate Debtor's liabilities far exceeded its assets, and no acceptable resolution plan was received during the three-year period when the Section 7 Petition was pending. The Tribunal emphasized that the IBC aims to protect creditors' interests and prevent the diminishing value of the Corporate Debtor's assets. Conclusion: The Tribunal dismissed the appeal, upholding the Adjudicating Authority's decision to admit the Section 7 Petition and initiate CIRP for the Corporate Debtor. The Tribunal emphasized that the Financial Creditor's statutory rights under the IBC could not be curtailed by the ICA or RBI Directions. The Tribunal also highlighted the importance of careful issuance of certified copies of orders to avoid errors.
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